Precise vat calculations undoubtedly are a must for perfect vat accounting

If you are a VAT registered trader in the United Kingdom or any other vat-enabled eu country then precise vat calculations really are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different goods and services, and you also need to calculate each vat rate precisely so as to file proper vat returns and also give the proper amount of vat tax.

In the United Kingdom, all vat rules are from HM Revenue and Customs or hmrc vat department. Hmrc has classified all taxable and vat exempt services and goods into 14,000 classifications. Thus, any product or service that you sell or buy is bound to fall under one of these classifications. Many of these goods and services fall under the regular vat rate of 17.5% that is slated to increase to 20% from January 4, 2011 onwards. Other goods and services come under the reduced vat rate of 5% while a limited number come under the zero vat rate There are also certain goods and services like those associated with charitable events, among others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will begin once you know the appropriate vat rate of every of the goods and services. For example, if you sell a set of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount is going to be ?35 while the total amount of your vat invoice including vat is going to be ?235. Similarly, let’s say you sell an item for ?50 that draws 5% vat rate then the vat amount on that product is going to be ?2.50 whilst the total amount inclusive of vat is going to be ?52.50. It is crucial to know your basic product or service cost, your vat cost as well as your total cost inclusive of vat so that you can bill your clients at the best possible rates whilst filing your vat returns without creating any calculation errors.

Calculating the right amount of vat can also be vital whenever you apply for vat refunds continue. You’ll have to do that in case your services or goods are imported to the UK from the other eu country which has already collected vat on them. In such a case, you would need to apply for vat reclaim to get back the money already paid in the country of origin. You need to hire an expert vat agent to ensure that probability of any miscalculations are minimized. Your vat agent could also take over all vat calculations in order that all your vat returns and vat refunds are handled in the stipulated time period and that too without calculation mistakes. The hmrc vat department offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will have to be employed.

Although vat isn’t a very complex tax method, you will still require calculations that manage to separate your basic costs from taxes. This will allow you to trade your goods and services after calculating proper profit margins. As you will also need to file regular vat returns and may also need to make an application for vat refunds, precise vat calculations will allow you to stay on the appropriate side of the vat law.